E.ON may have to sell nuclear plants to buy Endesa

The staff of the National Energy Commission wants E.ON AG, the world's largest power company, to sell Endesa's stakes in seven atomic plants, its power-supply business in the Balearic and Canary islands and plants that burn Spanish coal, said the people, who wouldn't be identified because the proposal is confidential. Spain, which has opposed E.ON's all-cash proposal in favor of a lower offer from Barcelona's Gas Natural SDG SA, gave the regulator the power to veto utility takeovers by foreigners three days after Dusseldorf-based E.ON made the February 21 offer. The assets identified for sale represent half of Endesa's Spanish business, leaving units in Italy, France, Chile, Colombia, Brazil and Argentina. “This won't stop E.ON because this takeover provides a growth platform in Southern Europe and gives it a hold in Latin America,” said Jose Javier Ruiz, an analyst with Exane BNP Paribas in London. “E.ON is unlikely to challenge this in court because it would just delay the takeover.” A spokeswoman for the commission said yesterday the agency won't comment on the proposals until they are made public. Sabine Hower, an E.ON spokeswoman in Dusseldorf, Germany, said she hadn't seen the draft. Officials in the press office of Endesa didn't answer the telephone when called after normal business hours in Madrid. The report also leaves open the possibility of an outright rejection of the bid from E.ON of Germany because it conflicts with Spanish law, the people said.

European governments have sought to create power companies big enough to compete when full market competition arrives in a year. The recommendations, if retained in the final proposal in their entirety, would strip assets from E.ON that could supply electricity to about 22.5 million homes. The staff report, scheduled to be delivered in final form in coming days, will be used by the full nine-member regulatory panel to rule on the takeover of Spain's largest power company. The regulator plans to rule on the final report at the end of the month, said one of the people. The board can veto the takeover, accept the staff recommendation in full or modify it. The remaining assets, including Madrid-based Endesa's businesses in Italy, France and Chile and its gas-fired and hydropower plants in Spain, may be attractive enough to carry on with the purchase, Ruiz said. E.ON, based in Dusseldorf, wants to add customers in Spain and Latin America. The plan by E.ON Chief Executive Officer Wulf Bernotat was opposed by the Spanish government. The regulator and the Spanish government have authorized a lower bid by domestic rival Gas Natural, currently worth € 20.3 billion. Endesa owns 3,641 megawatts of nuclear power plants in Spain, or 48% of the country's total. It also owns the monopoly power plants and distribution grids in Spain's Canary and Balearic islands, and three domestic coal-fed plants with an installed capacity of 3,770 megawatts. (Bloomberg)